Ares Capital: Competition Weighs Down On Yields And Margins (Archive)
Competitive pressures erode Ares Capital’s high-yield deal access and compress net investment margins.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- Ares Capital has played out as per my expectation since my last update, as it has underperformed the S&P500 by 3.61%. I continue to be bearish on the BDC.
- On the plus side, deal activity is improving. Fundings, commitments and backlog + pipeline figures all show a healthy rebound.
- But Ares Capital's yields and net investment income margins are under stress. Increased competition is making it difficult for the BDC to get its fair share of high-yield investments.
- Valuations are on the premium end, reducing the margin of safety for buys. Technical analysis vs the S&P500 suggests continued underperformance ahead for multiple quarters to years.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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